It’s mid-May and we are truly past season. And by season, I don’t mean the one with ornaments and trees. Season, for real estate, typically from January to March or April, marks the biggest pool of buyers our area sees for the whole year. Realtors and sellers look forward to the season as their busiest sales period and buyers expect to find their piece of Florida’s paradise. But this year, condo sales were down by over 30 percent in the first quarter.

Florida’s new condo law

The easy answer to explain the downturn in the condo market is high interest rates. But in my opinion that has very little to do with it, considering many of the condo sales here are cash transactions. Limited inventory coupled with Florida’s new condo law, enacted last year in response to the Champlain Towers collapse in Surfside, scared off many potential buyers.

The law changed building safety requirements and budget reserve funding. Buildings of three stories or more will be required to complete a Milestone Inspection Report and a Structural Integrity Reserve Study. The Milestone Inspection evaluates load bearing walls, primary structural systems and members.

The Structural Integrity Reserve Study requires that buildings have fully funded reserves to account for anything that has a deferred maintenance cost, including roofs, load bearing walls, floors, foundations, fire protection, plumbing, electrical, and waterproofing. For buildings constructed before 1992, the deadline to complete these reports is December of 2024.

To address these requirements, condo associations have begun extensive building improvement projects and have levied special assessments. These special assessments are often inherited by new buyers. Also, many condo associations increased their maintenance fees to protect unit owners from huge increases by the deadline.

But, this hedge to avoid future maintenance cost increases may not work as intended.

The real number to fully fund the reserves isn’t known yet. The cost won’t be known until a Structural Integrity Reserve Study is done, something that has not been done yet for most buildings. Since buyers don’t know how much maintenance costs will rise, they retreated from the idea of buying a condo this year. Buyers in large part decided to wait until the financial picture of owning a condo is more clear. And right now, that time is Dec. 31, 2024.

If you’re a seller, you can’t hide this reality from potential buyers. As a seller of a condo, you must be sure to comply with the notice requirements. The recently updated purchase contracts require sellers to give a copy of the Milestone Inspection Report to buyers. Plus, a seller is required to give the buyer a copy of the Association’s most recent Structural Integrity Reserve Study or a statement that the association has not completed one.

You might think that selling your condo in light of the new law would be impossible, but it’s not. There were about 3,400 condos sold in Broward County in the first quarter of 2023. Inventory is still very limited and the truth is, Florida remains at the top of the list of states to see inbound moves.